I've been fortunate in that throughout my three internship experiences, I've never experienced anything that amounted to a conflict. Minor disagreements were present as expected, but these were few and far in between and were all swiftly dealt with through communication and understanding. Therefore, for this example I will be using an anecdote concerning office politics that my mom -Cindy had told me about this past summer. For background information, Cindy works in corporate business and is a senior member in the finance division. The company she works for supplies fast moving consumer cosmetic goods.
The conflict arose due to misconduct from the sales department. It must be noted here that sales representatives are highly motivated to post strong sales numbers as their year end bonus heavily depends on performance. The sales division, under instruction from the vice president of sales engaged in a practice in which they were essentially stockpiling company products in the warehouses of the buyers who would then resell it to large super markets. The way this works is that the sales representative convinces the buyer to place a order larger than the number which they forecast will sell. They promise that doing so only ensures that the warehouses won't run into a shortage of supply problem from unexpected large orders during the year end shopping season and promises that returned goods will be refunded for the full price. This practice allows the entire sales division to post temporary high performance and fetch a large year end bonus. However, when the products are returned from the warehouses, there is a possibility that they are expired or in poor condition resulting in losses to the company.
When this practice was found out, Cindy led a company wide audit. The VP of sales when confronted took on a rather nasty attitude as he had been with the company for longer than Cindy despite occupying the same position in the company. He reasoned that the losses to the company were likely negligible and tried to push it under the table by dealing with the issue later when products are actually returned and are proven to have caused significant losses. Cindy was outraged by what she saw as a blatant disrespect of code of conduct and lack of remorse took on a similarly nasty attitude which resulted in a lot of friction caused by their personalities as discussed in the book chapter. Neither backed down and it became more of a power struggle than a right or wrong issue as both individuals had similar titles. Office atmosphere was tense as the rivalry blew over between finance and sales divisions.The issue eventually forced the CEO to fly in from Germany and resulted in lengthy investigations from a hired third party and more detailed auditing (lots of wasted time and money). The outcome was a hostile work environment for the better part of the year and both Cindy and VP of sales being forced to take an extended unpaid leave to let things cool over.
Looking at this post mortem from the VP of sales' perspective, I can understand the decision as he felt for posting results so that the division which included nearly a hundred people could go home happily with their bonuses. From Cindy's perspective, it was her job to audit and make sure that company finances are kept in tight check. The real take away from this is that both individuals could have dealt with this by avoiding open confrontation which negatively affected the working environment. Instead, a more amicable approach would have been appropriate until it was deemed that the practice was indeed a violation of code of conduct and had resulted in losses to the company. The atmosphere was so tense and toxic that Cindy later reflected that she shouldn't have acted based on her emotions and considered the effect such confrontation would have on her colleagues.
It's a good story and illustrative of real conflict in the workplace. One part of this you might have been a bit cleared on, who came up with the idea of stockpiling the product inventory? Was the VP of Sales the designer of this approach to game the company's system of rewards? Or did one of the salespeople working under the VP come up with the idea? I think the motives are somewhat different if you are the inventor than when you are simply trying to protect the people under you.
ReplyDeleteAnd if I understand the story as you told it, Cindy was really the messenger in this case. If that is right, and if Cindy's predecessor in Finance tolerated the practice, then there is the question of whether she managed the situation properly once she had done the audit. Could the CEO have been brought in earlier to resolve things? It sounds like Cindy played her cards wrong by confronting the VP of Sales and not anticipating that he would fight her on this.
Incidentally, the story also speaks to a criticism of the principal-agent model. This is when the agent can manipulate what the principal observes, when in fact the actual output is not as good as things seem. In this case, one wonders whether some other performance measure might have solved the problem. Bonuses are often paid at the end of a calendar year or a fiscal year because that is the tradition. If, however, there were a longer lag between when the economic activity occurs and when the bonus is paid, then the sort of gaming you describe the sales people engaging in couldn't happen. So one wonders why these longer lags don't emerge.
This happened back when the recession initially hit and atmosphere was tense in the work place as people were anticipating being laid off. The practice was not practiced before (maybe on smaller scales with individual sales reps, but never on a division-wide scale) hence there was no precedent for Cindy to really act on. She based her decision solely on the fact that such a practice was unethical and presented shady dealings in a German company that focuses on transparency. The CEO for this particular company could definitely have stepped in earlier, but fact is that most of the general operations are left to regional managers and rarely ever requires the central board in Germany to step in.
ReplyDeleteAs for the lag in bonus payment, there were internal talks of restructuring the sales and marketing departments to stop such practices from happening, but in the end as I heard, nothing was ever implemented. Bureaucracy was likely an important factor in this.